Sluggish progress on open banking regulation has left consumers “unduly at risk” and regulators need to urgently ramp up protection measures, a group of experts has warned.
Open banking, which was rolled out by regulators in 2017 to force high street lenders to open customers’ data to trusted third-party firms, has been consistently touted by fintech firms as crucial to competition in financial services.
However, a group of experts involved in shaping the future regulation of the sector have warned that not enough weight has been given to consumer protection measures, and products currently on offer are too limited in scope.
“We remain concerned that opening up wider data sharing and new ways to pay without also considering associated protections, could leave consumers unduly at risk,” the group, which includes Francis McGee, a panel member at the financial services consumer panel, and Jonathan Turner Technology Strategy and Innovation Lead at Fair4All Finance, said.
“We remain enthusiastic about the long-term consumer benefits that open banking can unlock, but worry that progress is slowing.”
The group added that products which would benefit consumers in vulnerable circumstances “remain limited in availability and uptake”.
“At a time when every pound counts and finding the best deal is difficult, consumers can’t understand why they can share their current account data but not most savings account or loan data,” the letter said.
The warning comes as fintech firms and banks await a crucial update on the future regulation of the industry in the coming weeks.
The regulatory council drawing up rules for the sector, were expected lay out the next steps for the industry last week but City A.M. revealed the announcement has been delayed.
Fintech industry body INnovate Finance has similarly piled pressure on regulators to move faster and allow consumers to reap the rewards of open banking amid a cost of living crunch.
The group wrote to the FCA in March saying that regulators need to quickly expand the UK’s open banking regime and loosen rules on “robo-advice” so that hard-up consumers can access free financial guidance on managing their debts.
An FCA spokesperson told City A.M. it is “committed to the continued development of Open Banking” and the Joint Regulatory Oversight Committee (JROC) in charge of drawing up the rules has set out a “vision for unlocking its potential”.